Inflation Or Deflation? Chris Martenson Says "Yes"

Tyler Durden's picture

Chris Martenson, whose opinions have appeared on Zero Hedge many times previously, was on Tech Ticker recently, presenting the case for why we are currently experiencing both inflation and deflation in various sectors of the economy concurrently. On the deflationary front, Martenson claims that with the 2 Year yielding 0.5% "the Fed can't continue to go forward and expand its balance sheet and so far they've been able to get away with it." As a result Martenson is convinced that once having embarked on counter-deflationary course, the Fed will have no choice but to commit itself to the fullest. Yet the reality is that courtesy of already rising commodity prices various segments of the economy already experiencing an inflationary push. Martenson acknowledges that too: "I am absolutely in the camp that we are seeing inflation in some areas and deflation in others. The continuous commodity index is absolutely screaming inflation at this point in time, but at the same time we are seeing houses decline in price, we are seeing a number of other thing decline which I think is what the Fed is most concerned about at this point in time. I think we are going to see both." So stagflation? "England is already in stagflation and we are dangerously close to it ourselves. We are experiencing both inflation and deflation, and that is squeezing workers even harder than any other condition you can experience because wages are stagnant while the price of goods and services rises" and the biggest asset of the working American, his home keeps declining. It will be up to the Fed to push the needle definitively into either side of the inflation/deflation debate tomorrow, or the whispers over the imminent arrival of stagflation will just keep getting louder.

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Mr Lennon Hendrix's picture

"Squeezing the workers."

The name of the game!  This is a corporate takeover.  A controlled demolition of wealth.

Hdawg's picture


America is a communist state.

Baron Robber's picture

HDawg, no its not even close to communism (hard to tell which would be worse). Its crony capitalism/corporatism/kleptocratic-fascist mix - call it any of these or all of them at once, but its not communism.

Hdawg's picture

Okay, we are at the stage just before complete Communism.  That being where government rewards the current corporate elite structure for destroying the middle class before politically turning the 'people' upon the corporate elite.  Then America will have it's Communism.

Buzz Fuzzel's picture


Cloward & Piven, Saul Alinsky?  Everything appears to be just about on schedule.

Of course business, free enterprise and corporations have to be the villains.  It is part of the plan.  Unfortunately too many corporate leaders seemed to be assisting in the vilification.

If you really want to know where we are and where we are going check out the past 10 years of Venezuelan history.


Noah Vail's picture

We need a new name for whatever the hell this nation has become. None of the old ones quite fit.

jmc8888's picture

Ummm no.  How come it seems just about every republican is such a dipshit they see FASCISM as COMMUNISM.

Oh that's right, because every dipshit republican who says that wants to tie in Democrats with Communism, thus if we are having communism, it's the democrats fault.

NOPE.  What we're facing is fascism.  Right-wing fascism.  Barack Obama, right wing neo-con democrat.  Yes it doesn't seem to be possible, but what the republicans are bitching about, is their own playbook being used by a democrat.

We are a fascist state, not communist.  What we are is the right-winger's dream.  

Communism my ass.  Next thing you know you'll be calling Obama emblamatic of the democratic ideal.  Or that republicans repsect the consitution. 

Nope, we've become a fascist state.  It's closer to republican side of things, the movement was republican, the reagan fascist revolution, the fascist contract with america, etc, etc.  But hey, I know REAL republicans are not fascist, and that their party has been hijacked for a couple of generations.  So no need for a normal republican (the few that exist) to feel that I'm saying I'm degredaing the republican ideal.  I'm not.  But one thing is for sure.

The problems we face, were created by fascist ideologies pushed by the republican party, and later backed by democrats, under both of their corporate and queen loving masters.





mynhair's picture

Yes, we are deflating inflation.

Any questions?

Dang, it could be we are inflating deflation.....

I get so confused....

johngaltfla's picture

It worked well for Zimbabwe.

maddy10's picture

Didn't housing in zimbabwe collapse along with inflation?

Wait,  I  can't use that word ,can I?

It is copyrighted by PhD's!!!!!!

mephisto's picture

It's very simple.

If you have an asset you need (house, car, future salary, wife) the dollar value will go down.

If don't have something you need (mortgage/credit card payments, future food/gas bills, mistress), the cost will go up.

Waterman Jim's picture

Couldnt this be called a crack-up boom.


the grateful unemployed's picture

very funny, like a booming laugh?

Monkey Craig's picture

Will the crack up boom be like Weimar or Argentina?

I believe the collapse will be epic. Never before has the world's reserve currency lost it's role (although the case could be made that gold lost that status post WW2) as the top paper dog.

Mr Lennon Hendrix's picture

The banking system revolves around gold.  Gold never lost status.  CBs/other banks hoard gold for this reason.  It is the loan of first recourse.  Issuance of monie how ever....

Monkey Craig's picture

Gold is money and nothing else. - JP Morgan

DoChenRollingBearing's picture



Only way out is gold.  And a big fistful of $100 FRNs to get us through the Deflation.  Which will then nicely bounce off into Inflation, and I guess Hyperinflation next.

Get prepared amigos mios.

Getagrip's picture

Actually, Great britain lost it's status as the reserve currency that we took over post WWII.'s picture

Invergordon Mutiny

Later, in 1931, sailors on 15 ships staged what became known as the Invergordon Mutiny.

The country was in economic turmoil at the time and the Treasury was trying to get to grips with a budget deficit of £170,000,000.

A commission was set up to find savings and among its recommendations was a cut to Royal Navy pay by 10%.

Reports of the reduction broke as the fleet weighed anchor in the Cromarty Firth, but some newspapers mistakenly announced pay was to be slashed by as much as 25%.

Outraged sailors formed a strike committee and decided to disobey orders until the reduction was reviewed.

The action ran for two days before the proposed cuts were withdrawn.

The mutiny had a part to play in Sterling being taken off the gold standard - the standard international measure of a currency's value - in September 1931, leading to a cheap pound and a revival in export trade.

Quintus's picture

You mean like the pound Sterling did post WWII?

Waterman Jim's picture

boom baby!


"'This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.'
"But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against 'real' goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

Ludwig von misses


maddy10's picture

So cashmongering by institutions and individuals precedes  the crack boom


How much cash does corporate america have , 2 trillion is it?

Not enough to bid up 60 trillion assets worldwide at present day prices

Mr Mises would have had a heart attack if he had seen the debt mountain that we allowed to grow

Cash on hand today is insufficient even to support existing nominal values of assets

Inflation is only plausible in essentials like Food, oil and water, Mostly state controlled and not good investments for retail portfolios


Long live Big Ben

AUD's picture

You haven't got it yet Durden.

You will always have both because they are the same thing.

wake the roach's picture

Inflation and deflation are the same disease but which have different causes.

Both inflation and deflation are the decrease in energy value (purchasing power) per monetary unit.

Inflation occurs when the ratio of monetary units increases relative to the consumption of energy units within an economy.

Deflation occurs when consumption of energy units in an economy decreases relative to the supply of monetary units.

But because neo-classical economists believe it is far better to live in a mathematical fantasy world of infinite growth, we need to include their fantasy money called credit in our evaluation. Because the supply of credit always exceeds the supply of pure money, the destruction of this credit money naturally gives pure money increased purchasing power.

Eg. Imagine a crazy world in which there was no such thing as credit and the supply of energy within crazy worlds economy was to fall or the price of that energy were to increase (pick your cause). Given the supply of money would remain constant and that each monetary unit now entitled its owner to a smaller slice of the energy pie, each unit of money has lost some of its purchasing power (inflation) even though the supply of monetary units did not increase.

Deflation in reality is a decrease in each monetary units purchasing power. It is only through the destruction of fantasy money that never really existed that pure money gains purchasing power.




Burnbright's picture

Fiat money is debt, so increasing the amount of money also increases the amount of debt, which is why the "Richest" countries in the world are also the most in debt.


Mr.Kowalski's picture

Squeezing the serfs is what it's all about.. government and banksters increase their power and wealth at the expense of the working serfs. One day this will end, and it'll happen very quickly, thanks to instruments such as the CDS and overleveraging.. the very devices used in their robbery of the serfdom. Here's my version of The Day It All Ends:

and the aftermath:

In general I believe Mortenson is absolutely correct in his inflation or deflation scenario.. housing, employment, wages and tax collections will continue on their southward journey and certain commodities (oil,grains) will head north.




Waterman Jim's picture

yup its all marxism.  a two tier society middle class

Mr Lennon Hendrix's picture

You are implying that Marx accurately described the oilgarchy?  Because marxism is not a two tier society with no middle class.

Waterman Jim's picture

Im sure your probably right, my bad

all this pure capitalism, as we call,  is just marxism is it not?

blunderdog's picture

Those things don't compare so well.

Marxism is a social philosophy.

Capitalism is an economic system.

It's like comparing poker with sportsmanship.

nonclaim's picture

Marxism is a stupid economic system where the basic relation production/price/consumption is turned to nothing as nobody has the means or is allowed to consume. Yet the retards always boast about increasing production while bankrupting the whole chain. It can never work and Mises demonstrated it very clearly in the '30s (IIRC).

The "social philosophy" part is just to numb the mind of the young reader into assenting to the idiocy and self-destruction.

It has not and never will work unless you consider misery, destruction and death as the only and true goal.

blunderdog's picture

You're thinking of communism or socialism, nonc.

nonclaim's picture

The theory versus its various implementations, sure. Not one practical experience was ever successful, failing sooner or later, because the theory if flawed as it does not generate enough wealth to sustain the system, much less growing it (thus the many methods of population curbing...).

But then, Marx was always asking for bail-outs from his good capitalist friend Engels... I concede that this part of his praxis is working fine since inception, if not stated in the theory.

blunderdog's picture

My point is only that Marx was describing a conflict inherent in our condition.  He wasn't planning the revolution.  He just thought it was inevitable.

I'd say Christianity isn't a blueprint for bringing about armageddon, either, even though Revelation is similarly inevitable in the Christian view.

That "Marxist" is equated with "communist" in the vernacular is a symptom of the lack of precision of our modern vocabulary.

But I'm just a stickler.  I mean, hey, how many folks have actually read the shit?'s picture

My point is only that Marx was describing a conflict inherent in our condition.

Now we see the violence inherent in the system!

maddy10's picture


Marxism is an idea of constant state of equilibrium

But humanity has evolved rapidly over the years

We should name the present generation as a diffferent species from those born in 50s 60s

Once we reach physical limits of Murphy's law where further computational acceleration can come from conversion of mass into energy, Marx's society has to embraced

But never beton human constancy- we are one hell of a restless species,aren't we?!!!

Mr Lennon Hendrix's picture

To me this system is a corptocracy using neo-capitalsim as its wench to further the causes it sees fit.  From my understanding Marxism in its simple terms would be the workers controlling the means of production.  Not sure if Marxism would ever work when the owner is prone to pay for new and cheap labour, but that is the philosophy.

Instant Karma's picture

Frankly, I can only guess at what "liquidity" in the system really means other than 0% interest rate loans for the big players who use leverage to make a lot from a lot bet on a small move.

Liquidity also seems to mean near 0% mortgages and 0% bond yields.

Liquidity does not mean greater access to credit for consumers, nor higher wages, nor more jobs, nor bigger government benefits. Indeed local and state governments are collapsing.

However, I have seen the future. Our standard of living is declining, and will continue to decline. The prices for commodities will continue to rise because our level of consumption no longer dictates price. With the rise of the BRICs and ASIA, and Europe and Japan in better overall shape than we are, we will pay more for less.

Bigger companies may indeed do well if they compete well internationally. Stocks may do well, who knows? You don't want bonds (unless you have to put your billions somewhere).

Commodities will appreciate to a point, but remember, price is a cure for price. In order for commodities to skyrocket in dollars, the dollar has to collapse. If that happened today, the price would come back down, because demand would collapse. But as the years go by, America will dictate price less and less and other countries will pick up our declining demand. 

We're not only broke, will incomprehensibly indebted.

Those government issued pieces of paper in your purse or wallet are a convenient medium of exchange, but they're not worth anything. Diversify.

New_Meat's picture

bad liquidity means dM3/dt is negative.  They've been hiding M3 for a long time, I'd like to see the 2nd derivative curve.  Gotta be bad as they don't publish M3 anymore.

- Ned

p.s. Sorry for the bad math representation-Knuth will punish me in the fullness of time.

DoChenRollingBearing's picture

Thank you Instant.

Liquidity for me means gold and a big wad of $100 FRNs to see us through the Wormhole.

the grateful unemployed's picture

As the personal stock market MD to this very very very ill patient, Ms Economie, let's draw this up. Patient has inflation and deflation, what could cause that? Some sort of poisoning, the body reacting to toxins, abnormally low interest rates, possible due to market manipulations. Housing assets plummet because housing went too high. Wall Street working harder, Main Street sitting on their ass. We've got to get Main Street working again, get the blood flowing. 

Inflation is okay, if we can inflate assets, while wholesale prices remain low. We still have that Chinese inflation ventilator, we use that. Deflation is like cardiac arrest, we can revive the patient, but to what point?  If we create the correct kind of inflation, it will counter the deflation, but the wrong kind of inflation will deprive the patient of the benefits of debt creation, which we all know well.

Runaway price inflation, causes relative asset deflation, which is what we're dealing with. We need some price controls, but we can't take the patient off the Chinese ventilator just yet. We can bring the patient around, but what if she can't get out of bed? 

I say this patient has toxic monetary syndrome. Fed's disease. The cure is simple, shoot every economist with a beard until the symptoms stop.

maddy10's picture

patient is a dumb alcoholic who had nearly drowned himself in booze at a weekend party

What do you do?

Send him to rehab ?

Or Krugman's bar?

'Man, he is having serious withdrawal- Give him some booze now'

Ask Big Ben tomorrow

cognitis's picture

PRC is today assuming the duty of world's primary consumer nation from US just as Japan assumed the duty of primary creditor nation from US over 20 years ago; so expect any commodity consumed by PRC to continue to increase in price, and at the same time expect any commodity consumed by Americans but not by Chinese to continue to decrease in price. Now and in the future US wages and real estate will decrease greatly in Yuan terms, while Crude Copper Iron will increase greatly priced in dollar terms.